Hurricane Harvey roiled fuel markets across the eastern US after the storm left almost one-quarter the nation's refining capacity reduced or shut in its wake.
The Environmental Protection Agency (EPA) issued sweeping fuel waivers across the eastern US as two major fuel pipeline systems starved for product from the Houston area. Unscathed Texas refiners prepared to resume operations as critical logistics infrastructure slowly opened, while a flotilla of Jones Act and foreign-flagged vessels worked to supply the US.
September Nymex RBOB today settled at $2.1399/USG, up by 29pc from a week ago, when Corpus Christi, Texas, refineries were ramping down ahead of Harvey's landfall nearby on 25 August. RBOB futures reached a $37.50/bl premium to October ICE Brent, its highest level in at least six years. The spread offers a gauge of export potential to the US.
Harvey disrupted at least 4.5mn b/d of Texas and Louisiana refining capacity since coming ashore with sustained winds of at least 130 mph (209 km/hr). Record rainfall dumping more than 47 inches (120cm) in the Beaumont and Port Arthur refining areas and 2 ft or more (61cm) across the Houston metro area disrupted 3.6mn b/d of capacity alone.
Colonial Pipeline continued to move fuel east of Lake Charles, Louisiana, and planned to intermingle gasoline blendstocks at terminals through the southeast south of Greensboro, North Carolina, fed by its 5,500-mile (8,851km) pipeline system. A lack of Texas production slowed pipeline operations, but the company worked to restart injection points near Houston and Port Arthur by 4 September.
Explorer Pipeline confirmed today it was shutting the two main segments of its 660,000 b/d products pipeline from Houston up through Oklahoma into the Chicago market as southern refiners cut output.
EPA waived requirements for higher-specification summer gasoline in 38 states, citing "extreme and unusual fuel supply circumstances."
Chicago CBOB yesterday settled at a 17c/USG premium to RBOB, its highest since June 2016 and more than three times the average premium this week last year. Argus-assessed US Gulf coast M grade gasoline settled at a 31.5c/USG premium to RBOB yesterday, its highest level in five years and more than three times the premium the same week last year.
Refiners have begun to grapple with direct flood damage or cuts to supply.
At least 2mn b/d of Texas refining capacity confirmed flooding on site, including Motiva's 600,000 b/d and Valero's 325,000 b/d refineries in Port Arthur and ExxonMobil's 557,000 b/d Baytown and 348,000 b/d Beaumont refineries. Flooding can delay refinery restarts for weeks or months, depending on the extent of the damage. Submerged compressors and other vital electrical equipment, fouled reactors or feedstocks and other equipment damage must be assessed and repaired or replaced.
The 135,000 b/d Valero Meraux refinery shut for 10 months following 2005's Hurricane Katrina in one of the longest flooding outages for the US Gulf coast.
Other refiners wait for key logistics infrastructure to return to service. Phillips 66 secured up to 1mn bl of crude from the Strategic Petroleum Reserve for its 252,000 b/d refinery in Lake Charles, Louisiana. Operator Energy Transfer Partners has not commented on the status of the Bayou Bridge pipeline that supplies that refinery, but the Beaumont, Texas, terminal it connects has closed.
Marathon Petroleum's 585,000 b/d Galveston Bay refinery in Texas City said late yesterday that it briefly idled units but would increase throughputs as access to transportation infrastructure improved.
The ports of Houston, Texas City, Galveston and Freeport reopened with restrictions, and Magellan restarted an 18-inch refined products pipeline from Texas City to the Houston area. But crude supply remained limited amid port restrictions and shutdowns or interruptions to roughly 2mn b/d of pipeline capacity into the area.
Valero began restarting its 95,000 b/d Three Rivers refinery near Corpus Christi earlier this week, and Flint Hills Resources notified state regulators of startup work at its 260,000 b/d Corpus Christi refinery. Citgo has not commented on its Corpus Christi refinery. Valero said it would work with its suppliers on the restart of its 200,000 b/d Corpus Christi refinery as that city's port began to slowly reopen toward a 4 September restart.
Products suppliers have meanwhile sought alternatives. Magellan Midstream Partners meanwhile reversed its bidirectional pipeline between Wynnewood, Oklahoma, and Frost, Texas, to allow Oklahoma refiners to supply the Dallas market through the 10-inch pipeline.
